Writ petition challenging demand for excess ITC involving fraud is dismissed; appeal is the appropriate remedy

Writ petition challenging demand for excess ITC involving fraud is dismissed; appeal is the appropriate remedy for factual and legal analysis.

Issue: Whether a writ petition challenging a demand for excess Input Tax Credit (ITC) under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), which involves allegations of fraud or willful misstatement and complex factual and legal issues, should be entertained when an efficacious alternate remedy of appeal is available.

Facts:

• Demands related to excess availment of Input Tax Credit (ITC) were made against the assessee. Since the demand was under Section 74, it implies allegations of fraud, willful misstatement, or suppression of facts, leading to the invocation of an extended period of limitation.
• The assessee submitted several contentions in the writ petition:
  1. There was no fraud or willful misstatement of fact on their part, and therefore, the extended period of limitation should not have been invoked by the CGST Department.
  2. There were “glaring errors evident from the record,” indicating that certain documents, though duly filed and referred to in the impugned order, had erroneously been recorded as not having been filed or considered.
  3. A specific legal question existed as to whether GST was payable at 12% or 18% (implying a classification dispute).

Decision: The court ruled in favor of the revenue. It observed that a perusal of the impugned order showed a detailed discussion regarding the nature of services provided by the assessee and the reasons why the department was of the opinion that a higher rate of tax was applicable. Furthermore, the court held that the question of whether there was fraud and willful misstatement of fact on behalf of the assessee would require an analysis of facts and various returns filed by the assessee, which could not be adequately done in a writ petition. Since the impugned order was clearly an appealable order under Section 107 of the CGST Act, the assessee was relegated to the appellate remedy so that all issues raised could be addressed by the Appellate Authority.

Key Takeaways:

• Alternate Remedy Rule is Paramount: This case strongly re-affirms the principle that High Courts, in their writ jurisdiction (Article 226 of the Constitution), generally refrain from interfering with assessment or demand orders when an effective and efficacious alternate statutory remedy, such as an appeal under Section 107 of the CGST Act, is available.
• Factual Analysis in Appeals: Issues involving allegations of fraud, willful misstatement, or suppression of facts (invoking Section 74 and extended limitation periods) are inherently factual. Determining mens rea (guilty mind) requires a detailed analysis of evidence, records, and returns, which is best suited for an appellate authority or Tribunal rather than a writ court.
• Detailed Order Implies Consideration: The court noted that the impugned order contained a “detailed discussion” on the nature of services and tax rates. This suggests that the adjudicating authority applied its mind, making it difficult for the assessee to argue a complete violation of natural justice (e.g., non-application of mind or non-consideration of submissions).
• Mixed Questions of Fact and Law: While the tax rate (12% vs. 18%) might appear as a question of law, its applicability often depends on the classification of services, which can involve factual determinations. The court implies that even such mixed questions are best handled by the appellate forum.
• Scope of Writ Jurisdiction: Writ jurisdiction is supervisory and is typically invoked for fundamental violations of law, jurisdiction, or principles of natural justice that cannot be remedied through ordinary appeal. It is not meant to be a substitute for the appellate process to re-evaluate the merits or factual findings.
• Relegation to Appeal: The decision to relegate the assessee to the appellate remedy under Section 107 ensures that all contentions, including the invocation of the extended period of limitation and the alleged factual errors, can be properly adjudicated